Credit Card Terms Taking Turns For Worse

Vera Gibbons On How Issuers Are Tightening The Screws To Protect Themselves

(CBS)  The impact of ultra-tight credit markets is hitting your credit cards, and you might not even realize it.

On The Early Show Tuesday, financial contributor Vera Gibbons explained that lenders are tightening terms in numerous ways, and you need to be aware of all of them to avoid possible trouble down the road.

Behind the changes is the simple fact that lenders want to protect themselves from bad debt, so they're tightening standards and practices in hopes of avoiding defaults by credit card users.

What are they up to?

LOWER CREDIT LIMITS

This is the biggest and perhaps most ominous change of all -- and something many consumers won't realize has happened to them until it's too late. Here's what's scary: You don't have to "mess up" in order for a company to lower your credit limit. Big companies such as American Express, Bank of America and others say they can and will change terms at any time, based on market conditions and the economy in general. Any "perceived risk" can also lower your limit. That includes a decline in credit scores or late payments on other bills.

How much are credit limits being cut? In some cases, the cuts are big, Some companies are lowering the limit to right above your balance, and as the balance drops (meaning, as you pay off your debt), the credit limit drops, too. That makes it VERY easy to exceed your credit limit.

Credit card companies DO have to inform you that they're lowering your credit limit, but who really reads those small-print pamphlets that come in the mail? Consumers may not know their limit has dropped until they go over it and incur a large fee. Even worse than a fee, however, is how this affects your credit score. When a credit limit is lowered, it appears that you're using a much larger percentage of your available credit. That lowers your credit score, making it more difficult to obtain a mortgage, car loan, or even another credit card.

INACTIVE ACCOUNTS CANCELLED

Something else to keep your eye on: Banks are cancelling un-used -- and thereby, unprofitable -- accounts to eliminate the costs of maintaining those accounts. An inactive card can also be cancelled if your risk profile changes. That also hurts your credit score. Again, you may not realize this is happened. If you just have the card on hand "for emergencies," you're probably not paying any attention to it. But now, more than ever, you want to protect your credit score and keep it as high as possible.

FEWER CARD OFFERS

If you consider all those credit card offers in your mailbox, you'll be glad to hear that companies are sending out fewer solicitations. HSBC has sent out 54 percent fewer offers this year; Citibank, 45 percent fewer. But if you don't have great credit, that's bad news for you. When you get those offers in the mail, it means you've been pre-approved for a card. But if you have to search out cards and apply on your own it can, once again, lower your credit score. Plus, it's simply a pain in the neck, AND it's getting harder and harder to qualify for good cards. You may have to settle for one with a much higher interest rate.

FEWER ZERO-PERCENT OFFERS

Used to be that no-fee, zero-percent credit card offers were a dime a dozen. Carrying a lot of debt? Transfer to one of these cards for free, and pay zero percent interest for a year. Now, if you even qualify, the offers are more likely to be for six months. You're also likely to pay a balance transfer fee of 3 percent or more. If you're looking for a good zero-percent card offer (AND you have good credit), Chase and Discover still have a few deals.

NO SECOND CHANCES

Mess up once and that's it, you're out of luck. Banks won't hesitate to increase your interest rate or impose big fees if you pay late, etc. It used to be that if you were a good customer, you could call and basically apologize, explain your mistake, and ask that the fee be removed or your rate re-adjusted. But no longer. Card companies are holding firm to their punishments, and no amount of cajoling will change their minds.

[tannerbird]

If people could get back to square one save the money they have been paying on credit cards even for a short time. they will shop for the best value shoping with a credit card this does not happen. [it may not seem like it but [cash] is still king.

[scottchop]

I bailed myself out, without the help of congress.

I just settled my $120,000 of credit card debt for just $24,980.

I did it all by myself.

You can too. It was really easy and quite painless in the end.

I know that people searching this site would be interested to read my story:

http://sites.google.com/site/settleyourcreditcards/

Thanks so much,
Scott Stiller
[e-mail]

P.S. Yes, I am available for interviews.

[scottchop]

I bailed myself out, without the help of congress.

I just settled my $120,000 of credit card debt for just $24,980.

I did it all by myself.

You can too. It was really easy and quite painless in the end.

I know that people searching this site would be interested to read my story:

http://sites.google.com/site/settleyourcreditcards/

Thanks so much,
Scott Stiller
[e-mail]

P.S. Yes, I am available for interviews.

[scottchop]

I bailed myself out, without the help of congress.

I just settled my $120,000 of credit card debt for just $24,980.

I did it all by myself.

You can too. It was really easy and quite painless in the end.

I know that people searching this site would be interested to read my story:

http://sites.google.com/site/settleyourcreditcards/

Thanks so much,
Scott Stiller
[e-mail]

P.S. Yes, I am available for interviews.

[bobnjersey]

[I am simply saying that Congress should lead by example.
------
Posted by cbsfan731 at 01:44 PM : Oct 14, 2008

no, it should be other way around
[Posted by jamesm12341 at 02:04 PM : Oct 14, 2008]

here''s a fine example of the bizzaro nature of the conservative thought process. james is clearly stuck in this mode without realizing he''s stuck ... and not concerned one bit about trying to find his way out.

the interpretation of this ''other way around'' principle: ''the followers should be setting examples for the leaders''

which is the bizzaro interpretation of: ''leaders should set the examples for their followers''.

[bootmanjohn]

I have come to the conclusion that no company can continously take advantage of you unless you permit them to do so...especially if they are credit card companies! I deal exclusively with credit unions. They tend to be more consumer friendly than banks. Many of them offer credit cards with very fair terms.

[tannerbird]

credit cards 6% max home loans 6% with 20% down auto loans 20% down with no exceptions max on credit cards of 500.00.

[zykracosmos]

Live within your means.
If you can''t afford to buy it outright.. wait a bit.
(You might decide you didn''t need it anyway.)
Buy with cash, not your debit card, and leave your credit card at home.
Keep only one credit card.
You''ll find it harder to part with cash.
Bring the credit card out ONLY when you have to buy something or pay for a repair that cannot wait.
Then try your best to pay it off within 30 days.
If you can''t, sacrifice a little till you can.
You ever notice that relatives who all decide to forego Christmas presents and just get together for dinner all seem to feel really good about it?
Ask yourself why.
Distinguish between what you want and what you need.
Train your children to create things for gifts.
Learn how to have fun without spending money to be entertained.
Chart your monthly income and regular bills.
Figure out what''s left (if anything) and save half of it.
Lose weight by avoiding expensive processed foods.
Have fun and cook it yourself.
Hey.. teach your kids how to cook (imagine that!)
You''ll feel better about yourself when you know you''re in control of your budget.

[nothappyatall]

I worked with a guy who built his house on about 20 to 30 credit cards. when he got a new credit card offer he would transfer the balance and cancel the old card. He built 2 houses that way and lives a good life. I told him he should write a book on it.

Posted by hunterdon6"

Um, that''s not a free ride- he still has to pay at least the minimum every month on ALL 30 cards and even then it doesn''t reduce the balance much.

[willbarefoot]

Things will turn around. Credit card companies will want to loan again. Only by then we will have learned to do without them and we can all say, no thank you. Let them suffer. What goes around comes around. Cut me off today and you lose a customer forever. I''ll never do business with you again - ever.

[tannerbird]

Like the old saying goes you are damed if you do and damed dont. the credit card companys make the rules a person can not win. Its just a shame everone cant pay them off and say no thanks. They have got a lot of people in trouble

[hypnotoad72]

Let''s be glad Best Buy is opening up shop overseas (pity they had to beg the government to help, instead of pulling up by their own bootstraps the same way the same politicians who helped them tell everyone else to live by). Let''s see how many get conned into credit cards -- for otherwise it''s obvious: Freezing credit like this, banks WOULD fail. Since Americans are getting smarter, it''s time to fool some other dumb schmucks.

[alicemode]

My question has always been, "WHY is paying OFF your credit card affecting your credit score in a negative way?"

Who made THAT rule?????

[max0010]

http://www.youtube.com/watch?v=1RZVw3no2A4

America will only remain a great country if her people protect their %u201Cfreedoms%u201D and the constitution.

[wardoglrs]

This is all a crock get as far away from these corps or they will own you even more. Stop paying taxes Keep your money screw these people and the government

[caldwellptr]

I am taking a Health Care Holiday this year. My out of pocket expenses for Health Care average almost as much as I pay in Taxes ... about 11 to 13 percent of my income.

[hunterdon6]

I worked with a guy who built his house on about 20 to 30 credit cards. when he got a new credit card offer he would transfer the balance and cancel the old card. He built 2 houses that way and lives a good life. I told him he should write a book on it.

[forasongca]

Hmmm...the whacko wingnuts are out in force today...on *both* sides of the aisle...

[bobnjersey]

[The net result of these measures will be the second wave of casualties--the consumer. Hit with huge fees and penalties will drive the last stake through the heart of Capitalism as Americans ... ]
[Posted by harbinger09 at 05:10 PM : Oct 14, 2008]

did you say ''drive the last stake thru the heart of capitalism''?

it''s all prophecized here:

http://www.amazon.com/New-Golden-Age-Revolution-Corruption/dp/1403975795/ref=sr_1_1?ie=UTF8&s=books&qid=1224019462&sr=8-1

http://en.wikipedia.org/wiki/Ravi_Batra

[harbinger09]

Credit cards ARE a Constitutional right. Just like shopping to keep the economy going is a patriotic duty according to Bush. In order to achieve that, most Americans have to use credit cards--ergo credit cards are an adjunct to keeping the economy going by eternally shopping.

Posted by harbinger09 at 05:14 PM : Oct 14, 2008


(Ahem--the "right" is the pursuit of happiness--we do it with credit cards) LOL